A Falling Dollar, $100 Oil,
and the Sub-Prime Mess: Is
a Recession Inevitable?
Bernard L. Weinstein, Ph.D.
Presentation to North Dallas Chamber of Commerce Economic Outlook
Breakfast
January 8, 2008
Real Economic Growth
Gross domestic product
9%
8% 3Q 2007:
7% 4.9%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2003 2004 2005 2006 2007
Source: Commerce Department
Nonfarm Payrolls
Monthly change, in thousands
400 Dec. ’07:
18,000
300
200
100
0
-100
D J F MA M J J A S O N D J F MA M J J A S O N D
’05 2006 2007
Source: Labor Department
U. S. Jobless Rate
In percent, seasonally adjusted:
5.2%
5.0%
4.8%
4.6%
4.4%
4.2%
D J F M A M J J A S O N D
’06 2007
Source: U.S. Department of Labor
Personal Income
Total personal income in trillions of dollars, before taxes,
at seasonally adjusted annual rates
Nov. 2007:
$11.9 $11.87 trillion
$11.7
$11.5
$11.3
$11.1
$10.9
N D J F M A M J J A S O N
2006 2007
Source: U.S. Department of Commerce; Bureau of Economic Analysis
Retail Sales
Total retail sales in billions of dollars, seasonally adjusted.
Nov. 2007:
$400 $385.8 billion
$380
$360
$340
$320
$300
N D J F M A M J J A S O N
’06 2007
Source: U.S. Commerce Department
Construction Spending
In billions of dollars, seasonally adjusted
$1,300 Nov. 2007:
$1.17 trillion
$1,250
$1,200
$1,150
$1,100
$1,050
$1,000
N D J F M A M J J A S O N
2006 2007
Source: Commerce Department
Productivity
Nonfarm business productivity, percent change from previous quarter at
annual rate, seasonally adjusted
12%
10%
8%
6%
4%
2%
0%
-2%
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
’03 2004 2005 2006 2007
Source: U.S. Department of Labor
Oiloholics
Twin Concerns
History Lesson
Deficit in International Goods
& Services Trade
Billions of dollars, seasonally adjusted. Import figures exclude shipping and insurance.
$70
$60
$50
$40
$30 Oct. 2007:
$57.8 billion
$20
$10
$0
O N D J F M A M J J A S O
2006 2007
Source: U.S. Department of Commerce
Industrial Production
Index, 2002=100, seasonally adjusted
115
110
Nov. 2007:
113.9
105
100
2005 2006 2007
Source: Federal Reserve Board
Bigger Role in Economy
Falling Dollar,
Smaller Deficits
Source: U.S. Census Bureau, JPMorgan Chase
Housing Starts
New private housing starts during the month, in millions, at
seasonally adjusted annual rates.
2.0
Nov. Starts:
1.8 1.19
1.6
1.4
1.2
1.0
N D J F M A M J J A S O N
2006 2007
Source: Dept. of Commerce; Dept. of H.U.D.; Census Bureau
New-Home Sales
Single-family homes (in thousands)
1,300
Nov. 2007:
1,200 647,000
1,100
1,000
900
800
700
600
2005 2006 2007
Source: Commerce Department
Existing-Home Sales
Annual rate, in millions of dwelling units.
Nov. 2007:
7.5 5.0 million
7.0
6.5
6.0
5.5
5.0
4.5
2005 2006 2007
Source: The National Association of Realtors
Source: Wall Street Journal, Oct. 11, 2007
Source: Wall Street Journal, Oct. 11, 2007
Highest Subprime
Exposure
Source: Wall Street Journal, Oct. 11, 2007
Subprime Loans
in 2006
High Rate
Number of % of Total High Rate Loans as % of
Loans Loans Loan Volume Total Loans
Dallas-Plano-
47,207 (15) 29.0% (130) $5.162 b (27) 22.4% (176)
Irving
Fort Worth-
24,638 (37) 29.7 % (109) $2.330 b (57) 24.0% (135)
Arlington
U.S. 3,995,903 28.8% $632.5 b 24.3%
Source: Wall Street Journal, Oct. 11, 2007
Dip in Household Ownership
Home Value Decline
Construction Lending And Sub Prime Loans
Producer Prices
Percentage change from previous month, seasonally adjusted.
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
-2.0%
N D J F M A M J J A S O N D J F M A M J J A S O N
’05 2006 2007
Source: Labor Department
Consumer Prices
Percentage change, month to month (seasonally adjusted)
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
0
-0.2%
-0.4%
-0.6%
-0.8%
N D J F M A M J J A S O N
2006 2007
Source: Bureau of Labor Statistics
Consumer Confidence Index
From a monthly survey of 5,000 U. S. households, 1987 = 100
120
110
100
90
80
70 Nov. 2007:
87.3
60
50
Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov
2006 2007
Source: The Conference Board
Leading Indicators
Index of 10 indicators designed to “lead,” or predict overall
economic activity; 1996 = 100.
142
Nov. 2007:
140 136.3
138
136
134
132
N D J F M A M J J A S O N D J F M A M J J A S O N
’05 2006 2007
Source: The Conference Board
Unemployment Rate, U. S.,
Texas, & D/FW
8.5%
U. S. & Texas Seasonally Adjusted U. S. Dec. 2007 = 5.0%
*D/FW not Seasonally Adjusted Texas Nov. 2007 = 4.1%
7.5% D/FW Nov. 2007 = 4.0%
Texas U.S. D/FW*
6.5%
5.5%
4.5%
3.5%
Jun Jun Jun Jun
2004 2005 2006 2007
Source: Texas Workforce Commission
Payroll Employment in Dallas-
Plano-Irving Metropolitan Division
1999-2006 (annual averages)
Number of Jobs Gain/Loss
1999 1,893,900 -----
2000 1,966,900 73,000
2001 1,976,500 9,600
2002 1,916,000 -60,500
2003 1,883,000 -33,000
2004 1,903,300 20,000
2005 1,950,900 47,600
2006 2,023,700 72,800
2007 2,103,900* 80,200
*Through October 2007
Source: Texas Workforce Commission